The future of nuclear: Subscription, Upcycle, New tech

Nuclear power is set to play a bigger role in the energy transition as energy security is prioritised. We see a bright SUN in China's nuclear and equipment sector, which the market may be overlooking: 1) a growing share of Subscription-based maintenance services lifting margins; 2) Upcycle in nuclear capex, with approvals and investments implying nuclear's generation share is rising from 5% today to over 8% in 2035E; 3) New tech leading in small modular reactors (SMRs) and fusion.

China's power equipment OEMs are adopting service-based models, a move that could improve earnings quality and valuation.

China's nuclear expansion is accelerating faster than we expected. China approved 10 new reactors in April 2025, the highest number since 2009. We raise 2024-35E capacity CAGR to 10.2%, assuming 10 large and one SMR approvals a year. This implies nuclear's power generation share could rise to over 8% in 2035E. Operators' capex should rise at a 26% CAGR in 2023-27E, typically leading equipment revenue by two years.

Next-gen nuclear technology is poised to drive long-term earnings growth, in our view.